DocketNumber： 86-2643
Citation Numbers： 840 F.2d 1452, 1988 U.S. App. LEXIS 2422
Judges： Wiggins, Kozinski, Gray
Filed Date： 2/26/1988
Status： Precedential
Modified Date： 10/19/2024
We consider whether, under Guam law, a release signed as part of a settlement of claims arising from an automobile accident bars recovery for after-discovered injuries.
Facts
On November 26, 1982, appellee Vicente Morta suffered a collision that damaged his 1976 Mazda station wagon and caused him bodily injury. According to Morta, the car was “a total loss.” 1 Reporter’s Transcript (RT) at 39. Morta himself was knocked unconscious and taken by ambulance to the emergency room at Guam Memorial Hospital. After treating Morta, the attending physician assured him that he was fine and could go home. Afterwards, Morta continued to have pain in his muscles, chin and chest. He was treated three days later by a second physician at the Seventh Day Adventist Clinic, who also told him he was fine and the pain would eventually subside.
Morta sought compensation for his losses from appellant Korea Insurance Corporation (KIC), which insured the driver who had caused the accident. Morta was directed to Bemabe Santa Maria, a claims adjuster. Morta and Santa Maria happened to be from the same area of the Philippines and conversed in their native tongues, Tagalog and Ilocano. Morta testified that he had no problem understanding Santa Maria.
Santa Maria helped Morta complete the claim form, received from Morta his medical reports, examined the damaged Mazda and, acknowledging the liability of his insured, offered Morta $900. Morta testified that the settlement offer had several components: “Three Hundred Dollars for my car; $250 from loss of compensation of work, like that; and Two Hundred some for sufferings and injury that I suffered, you know. So, they told me, included also the medical bill from SDA and the towing expenses, that item.” 1 RT at 70-71; id. at 44.
Morta was not satisfied with that amount, claiming that the car alone had a blue-book value of $2300.
About a week after the settlement, Mor-ta began to feel ill and dizzy. He was given medication by his doctor but soon thereafter he collapsed unconscious, awaking in a Honolulu hospital after undergoing emergency surgery for a blood clot in his brain. The medical bills amounted to approximately $11,000, all paid for by Morta’s insurer, FHP, Inc.
Morta filed suit to recover damages resulting from this injury, disavowing the release on the ground that Santa Maria fraudulently misrepresented its contents. FHP intervened to recover from KIC for all medical expenses incurred in treating Morta’s accident-related injuries. The parties stipulated to a separate trial on the validity of the release. After the evidence was presented, KIC moved unsuccessfully for a directed verdict. The jury returned a general verdict holding the release invalid, and the superior court entered judgment to that effect. The parties then stipulated, subject to KIC’s right to appeal, to entry of judgment against KIC for $14,600, which, together with the $900 settlement, constituted the limits of the insurance policy.
The Appellate Division of the District Court for the District of Guam affirmed the judgment and KIC appealed to us under 48 U.S.C. § 1424-3(c) (Supp. Ill 1985).
Contentions of the Parties
KIC argues that Morta signed the release with eyes open and for valuable consideration. By its terms, the release covers all claims arising out of the accident, whether known or unknown. In KIC’s view, the release therefore conclusively bars Morta’s claim, and the superior court should have directed a verdict in KIC’s favor.
Morta attacks the release on two grounds. First, he argues the release is subject to rescission because it was obtained by fraud, undue influence, mistake or deceit. Second, he argues that, even if the release is binding, it may not be invoked to bar recovery for injuries unknown and unanticipated at the time of execution. Morta argues that there was sufficient evidence for the jury to return a verdict in his favor on one or more of these theories and the superior court was therefore correct in refusing KIC’s request for a directed verdict.
Discussion
A directed verdict will be granted only if, examining the evidence in the light most favorable to the nonmoving party and drawing all reasonable inferences in its favor, “there is no substantial evidence to support a verdict for that party.” Fabrica Inc. v. El Dorado Corp., 697 F.2d 890, 892 (9th Cir.1983); see Peterson v. Kennedy, 771 F.2d 1244, 1256 (9th Cir.1985), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986) (directed verdict proper where “the evidence permits only one reasonable conclusion as to the verdict”). We apply the same standard as the trial court in reviewing its decision. Walker v. KFC Corp., 728 F.2d 1215, 1223 (9th Cir.1984); Fabrica, 697 F.2d at 892.
I
The jury was properly instructed that the release could be set aside if induced by fraud, undue influence, mistake or deceit.
A. Fraud. Morta’s original complaint did not attack the release at all. He
The evidence presented to the jury consisted largely of testimony from Morta and Santa Maria, each giving his account of the negotiations between them. Those accounts do not differ all that much. Significantly, Morta did not testify that Santa Maria misrepresented the content or effect of the release in any way, only that Santa Maria never said anything about it at all. According to Morta, Santa Maria handed him the release, stating, “This is for your claim.” 1 RT at 38. This statement, standing alone, certainly does not amount to fraud or anything close to it.
Morta argues, however, that Santa Maria committed fraud when he told Morta that $900 was “the only amount the insurance could give [him].” 1 RT at 70. Morta testified that when he asked, “Is that all I can get?,” Santa Maria responded, “Well, I’m not the one who decide [sic] this. They decide it in there. I’m just working for them, so, I can’t do nothing.” Id. at 71. According to Morta, this “led [him] to believe that $900.00 was the only amount available to compensate him.” Appellees’ Brief at 12. This is not a reasonable construction of Santa Maria’s statement, and the evidence conclusively establishes that Morta did not interpret it in this fashion. After reviewing the offer, Morta consulted a lawyer about the possibility of recovering more. The lawyer advised him that he could in fact get more—perhaps $1500— but cautioned that it would take time. Santa Maria’s representation that he could pay no more—the type of statement frequently made by parties during negotiations—simply does not amount to fraud. Neither does anything else presented at trial. We therefore are unable to find any support for the jury’s verdict on a theory of actual fraud.
The jury was also instructed on constructive fraud, which consists of “any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him.” Guam Civ. Code § 1573(1) (1970) (emphasis added). As the language of the statute suggests, a finding of constructive fraud requires a confidential or trust relationship. Guthrie v. Times-Mirror Co., 51 Cal.App.3d 879, 889, 124 Cal.Rptr. 577, 584 (1975).
B. Undue influence. Under Guam law, undue influence may be established under any of the following circumstances: (1) “the use, by one in whom a confidence is reposed by another, ... of such confidence ... for the purpose of obtaining an unfair advantage over him”; or (2) “taking an unfair advantage of another’s weakness of mind”; or (3) “taking a grossly oppressive and unfair advantage of another’s necessities or distress.” Guam Civ. Code § 1575 (1970). We find no evidence that Morta signed the release as a result of any of these circumstances.
Morta points to nothing in the record suggesting that he reposed any confidence in Santa Maria. To the contrary, all the available evidence suggests that Morta and Santa Maria negotiated at arm’s length. Morta did not rely on Santa Maria to take care of him: He carefully checked the blue-book value of his car, obtained treatment from two physicians of his own choosing and consulted a lawyer. He complained to Santa Maria about the amount of the offered settlement and tried to get him to pay more. On the basis of the lawyer’s advice, Morta finally decided to take the money offered to him and be done with the business.
Nor is there any evidence that Morta suffered from mental weakness of which Santa Maria could have taken advantage. Morta was not incapacitated by his injury; he was neither hospitalized, drugged, in serious pain nor otherwise prevented from bargaining effectively.
Finally, nothing in the record suggests that Santa Maria knew or suspected Morta had any continuing vulnerability, or that Santa Maria did anything to take advantage of the situation. There was no reason for Santa Maria to believe Morta was in dire straits; Morta was not hospitalized, he was working and did not disclose any particularly pressing need for the settlement money. Like anyone else involved in an accident, Morta was anxious to get the unpleasant business behind him, advising Santa Maria that ‘“I’m getting tired of borrowing my daughter’s car.’ ” 1 RT at 41; see id. at 77. That hardly amounts to the type of pressing need that would provide a basis for a claim of undue influence or overreaching. See Sanger, 486 S.W.2d at 478 (upholding release as to unknown injuries where plaintiff quickly settled, being “anxious to get his car fixed because he was going on vacation in two weeks”).
In any event, Santa Maria did nothing to pressure Morta into accepting the settlement in full or in part. Santa Maria did not intimate that the settlement would be withdrawn if not accepted on the spot, or that settlement on the car would be held hostage to a release of the personal injury claim; nor did Santa Maria delay making an offer in order to push Morta to the wall, or refuse a request for an advance payment or a rental car; nor was the offer shockingly low in light of what the parties knew at the time. No reasonable jury fairly applying the law could reach a verdict of invalidity on the basis of undue influence.
C. Mistake. The jury was instructed that it could set aside the release if it found that Morta’s consent was vitiated by mistake. Under Guam law, “[mjistake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in ... [a]n unconscious ignorance or forgetfulness of a fact past or present, material to the contract.” Guam Civ. Code § 1577(1) (1970) (emphasis added).
Morta alleges that he did not read the release and was mistaken about its contents. That mistake is inadequate to justify rescinding the release, however, because it was “caused by the neglect of a legal duty on the part of the person making the mistake.” Morta spoke English; he was able to identify and read the release on the witness stand. Had he bothered to read the release before signing it, he would
[A] person who, without coercion or undue persuasion, executes a solemn release cannot subsequently impeach it on the ground of his own carelessness, if at the time of its execution he might have advised himself fully as to the nature and legal effect of the act done. He cannot then complain that an imposition has been practiced upon him, and if he knows or by inquiry might know the exact nature of the act done, cannot subsequently invoke his own heedlessness to impeach his release by calling such heedlessness someone else’s fraud. He has no right to act as one who understands what he is doing, unless he intends to lead those with whom he is dealing to believe that he understands the act done.
66 Am.Jur.2d at 691 (emphasis added).
In short, nothing on this record supports rescission of the settlement agreement and release under the theories presented to the jury.
II
Alternatively, Morta argues that the release is not binding as to injuries unknown and unforeseen at the time of its execution. He cites Guam Civ. Code § 1542 (1970), which provides that “[a] general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” The release Morta signed, however, is not a general release within the meaning of this section. Section 1542 provides only that a document generally releasing all claims, but not referring to unknown claims, does not discharge such claims. A release expressly compromising unknown claims growing out of a particular accident is valid and enforceable according to its terms. Berry v. Struble, 20 Cal.App.2d 299, 302-03, 66 P.2d 746, 747 (1937) (construing Cal.Civ.Code § 1542, which is identical to the Guam statute); Kostick v. Swain, 116 Cal.App.2d 187, 194, 253 P.2d 531, 536 (1953) (“[i]t appears to be the rule that where the parties ... expressly and intentionally settle
Morta cites Casey v. Proctor, 59 Cal.2d 97, 378 P.2d 579, 28 Cal.Rptr. 307 (1963), which overruled the Berry line of cases and held that unknown claims may be released only if there is evidence “apart from the words of the release” that the parties intended to cover such claims. Id. at 109, 378 P.2d at 586, 28 Cal.Rptr. at 314. Morta contends that there was no extrinsic evidence in this case supporting the words of the release.
While Casey is now the law of California, it is not necessarily the law of Guam. The Guam Codes were originally promulgated by the Naval Government of Guam on December 28, 1933; they were later codified and enacted by the first territorial legislature in 1953. Because the Guam Codes were derived from the California Codes, we have held that California decisions predating the enactment of the Codes are “controlling authority on issues of the statutory construction and effect of Guam laws.” Roberto v. Aguon, 519 F.2d 754, 755 (9th Cir.1975) (citing United States v. Johnson, 181 F.2d 577, 580 (9th Cir.1950)). California cases decided after the adoption of the Guam Codes are merely persuasive. Id. (citing Tabor v. Ulloa, 323 F.2d 823, 824 n. 5 (9th Cir.1963)).
It is unclear whether, under Roberto, the decision in Berry is controlling or merely persuasive. Roberto seemed to consider the adoption of the Codes in 1933 as the pivotal date, although its rationale seems to apply equally to the enactment of the Codes by the Guam territorial legislature in 1953. Berry was decided in 1937, less than four years after the original adoption of the Guam Codes, and appears to follow prior case law in construing section 1542. See Dingman, 3 Cal.App.2d at 514-15, 39 P.2d at 827. It clearly represented the law of California when the Guam legislature enacted the Civil Code. See Kostick, 116 Cal.App.2d at 194, 253 P.2d at 536 (1953). If not controlling, Berry is certainly highly instructive on the proper interpretation of section 1542. Casey, having been decided ten years after Guam readopted the Codes in 1953, holds considerably less sway.
In any event, we believe that, by relying on the agreement of the parties rather than extrinsic evidence, Berry provides the far better rule of law. Written instruments, fixing the parties’ rights and responsibilities by mutual consent, bring an important measure of order to life and greatly facilitate the adjudicatory process. While interpreting contract language is not always easy, sticking to the words the parties actually used limits substantially the bounds of legitimate disagreement. This objective rule thus “favors the orderly settlement of disputes and avoids multiplicity of suits and the chaos which would result if the releases were not treated seriously by the courts.” Trevathan, 519 S.W.2d at 616; accord Emery, 429 Pa. at 326, 240 A.2d at 70.
Casey, by contrast, adopts a parol evidence rule stood on its head: Extrinsic evidence not only is permitted to explain or amplify the words of a written instrument, it is required. See Larsen v. Johannes, 7 Cal.App.3d 491, 506, 86 Cal.Rptr. 744, 752 (1970). This approach is antithetical to the objective theory of contract law, a theory that binds the parties to the reasonably objective meaning of the words they use, not some secret reservation or misperception they may harbor. As the Maryland
Importantly, Casey precludes summary judgment in cases involving written releases. Interpreting the language of a written instrument is normally a question of law for the court to decide; claims regarding secret intentions or reservations raise issues of fact that must be put before a jury. Under Casey, a plaintiff may raise an issue of fact simply by claiming that he did not know, or did not think, or was not told, or did not understand what he was doing, regardless of any contrary representations in the written instrument. Casey thus short-circuits the binding force of written agreements by giving juries the power to nullify them.
At root, this case is about the respect the law ought to accord agreements between private parties. Despite recent cynicism, sanctity of contract remains an important civilizing concept. See, e.g., C. Fried, Contract as Promise 1, 132 (1981) (“[tjhese are indeed the laws of freedom”). It embodies some very important ideas about the nature of human existence and about personal rights and responsibilities: that peopleJiave the right, within the scope of what is lawful, to fix their legal relationships by private agreement; that the future is inherently unknowable and that individuals have different visions of what it may bring; that people find it useful to resolve uncertainty by “mak[ing] their own agreement and thus designating] the extent of the peace being purchased,” Bernstein, 290 Md. at 459, 430 A.2d at 606; that courts will respect the agreements people reach and resolve disputes thereunder according to objective principles that do not favor one class of litigant over another; and that enforcement of these agreements will not be held hostage to delay, uncertainty, the cost of litigation or the generosity of juries. As Professor Fried notes,
[t]he regime of contract law, which respects the dispositions individuals make of their rights, carries to its natural conclusion the liberal premise that individuals have rights. And the will theory of contract, which sees contractual obligations as essentially self-imposed, is a fair implication of liberal individualism.
C. Fried, Contract as Promise 2 (footnotes omitted).
But “the general rule of freedom of contract includes the freedom to make a bad bargain.” Sanger, 486 S.W.2d at 482. “If we take autonomy seriously as a principle for ordering human affairs, ... people must abide by the consequences of their choices_” C. Fried, Contract as Promise 113. It is a fundamental principle of contract law, therefore, that “[wjise or not, a deal is a deal.” United Food & Commercial Workers Union v. Lucky Stores, Inc., 806 F.2d 1385, 1386 (9th Cir.1986).
Morta’s latent injury makes this a hard case factually but not legally. Parties can never be sure about what the future will bring; they sign contracts for the very purpose of guarding against unforeseen contingencies. Morta freely entered into a settlement that specifically released unknown claims for latent or progressive personal injuries. There being no cause either in fact or law for invalidating the release, the superior court erred in failing to direct a verdict upholding it.
Conclusion
The judgment of the district court is REVERSED, and the case is REMANDED
. Santa Maria testified that the settlement broke down into $500 for Morta’s car and $400 for personal injuries.
. He also admitted, however, that the 1976 Mazda station wagon was not in mint condition: "the body got some rusty spots which are in the hood.” 1 RT at 77-78.
. Although the superior court gave a separate instruction on deceit, it was all but identical to the instruction on actual fraud. Moreover, there is no separate provision concerning deceit in the Guam Civil Code. We therefore consider deceit as merely a species of fraud.
. Morta did not plead mistake in his complaint, even though mistake must be averred with particularity. See Guam R.Civ.P. 9(b) ("[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity”). Nor did he attempt to amend his complaint to plead mistake. Furthermore, under Guam Civ. Code § 1691(2) (1970), Morta was obligated to tender return of the $900 consideration he received for signing the release as a prerequisite to rescission on any ground other than fraud. See Graham v. Atchison, T. & S.F. Ry., 176 F.2d 819, 826 (9th Cir.1949). The record is unclear about whether those procedural requirements were satisfied or waived. To conserve judicial resources, however, we assume they were satisfied and proceed to address these issues on the merits.
. Section 1573, like most of the Guam Codes, was borrowed from the California Codes, and we consider California decisions in construing identical provisions of Guam law. See, e.g., Smith v. Lujan, 588 F.2d 1304, 1306 (9th Cir.1979).
. Cf. Backus v. Sessions, 17 Cal.2d 380, 384, 110 P.2d 51, 53 (1941) (plaintiff still hospitalized in drugged, semiconscious state); Wetzstein v. Thomasson, 34 Cal.App.2d 554, 558-59, 93 P.2d 1028, 1030-31 (1939) (adjuster repeatedly visited plaintiff at her bedside for hours despite her stated wish not to discuss settlement); Weger v. Rocha, 138 Cal.App. 109, 114-15, 32 P.2d 417, 420 (1934) (plaintiff was "confined in a cast flat on her back, in a highly nervous and hysterical condition, suffering much pain, ... importuned and importuned by the agent"); Raynale v. Yellow Cab Co., 115 Cal.App. 90, 92, 300 P. 991, 991 (1931) (defendants discussed minor property damage with plaintiff while she was still dazed and “in such agony that she could not and did not read the paper she signed," and then, "without explaining its effect, plac[ed] before her a release covering matters not discussed”).
. There is nothing ambiguous, unclear or tricky about the release. It is less than a page long. At the top, in characters a quarter-inch tall, is the word "RELEASE"; immediately beneath, in slightly smaller letters, are the words "OF ALL CLAIMS.” A few concise sentences follow, clearly and unequivocally stating that Morta releases KIC from all claims "growing out of any and all known and unknown, foreseen and unforeseen bodily arid personal injuries and property damage” arising out of the accident in question. Morta also acknowledges that "the injuries sustained are or may be permanent and progressive and that recovery therefrom is uncertain and indefinite_” In capital letters near the bottom is a certification that the signer has read and understands the terms of the release; immediately above the signature line, also in capitals, is a "caution" instructing the signer to read the release before signing it.
. The dissent suggests six factors that might lead a reasonable jury to conclude that Santa Maria’s conduct was "objectionable enough to excuse the plaintiff from his failure to read and understand the release that he signed and the waiver that it contained." Dissent at 1461. With all due respect, "objectionable enough” is not a legal standard. Morta cannot avoid the release on the basis of general unease the jury might feel about the fairness of the settlement; there must be substantial evidence justifying rescission on one of the specific grounds provided by Guam law. The dissent does not analyze the six factors in terms of any particular legal theory, and with good reason: None of them, alone or in combination, amounts to fraud, undue influence or mistake.